Lakshmi Trade Credits Ltd. (LAKTRADECRED) - Director Report

Company director report

LAKSHMI TRADE CREDITS LIMITED
DIRECTORS' REPORT
TO SHAREHOLDERS
Your Directors have pleasure in submitting the TWENTIETH ANNUAL REPORT
together with the Audited Accounts for the year ended 31st March 1998.
APPROPRIATIONS
In January 1998 the Reserve Bank of India came out with stringent
guidelines regulating the functioning of NBFCs vis-vis fixing ceilings on
acceptance of deposits interest payment and spelling out prudential norms.
However in practice these guidelines could not be complied with most of the
NBFCs particularly by those solely engaged in Hire Purchase and Leasing
Business. The Reserve Bank of India and the Union Finance Ministry are
engaged in an exercise for the past several months to find out a practical
and realistic solution to the consequential problems of NBFCs now faced by
them. There is no other go but to redefine new norms for accepting fresh
deposits availing of Bank Credits under liberalised priority lending policy
delinking credit rating for the purpose of accepting deposits etc.
OPERATIONS
Severe liquidity problems, collapse of the capital money market, the onset
of recession crippling the economy, recessionary trend in automobile
industry and unprecedented demand for repayment of deposits have affected
our normal operations considerably. There is a steep decline in the revenue
from the Hire Purchase in trucks. Due to the escalation in the cost of
commercial vehicles fuel and accessories etc, the truck operators tend to
postpone the repayments of their monthly instalments to NBFCs. The
Industrial units which have availed of leasing credits are preferring to
lay off their factories.
The financial institutions/banks continue to be shy in extending fresh term
loan/refinance limits of NBFCs.
As on 31/03/98, the total deposits stands at Rs.30.35 crores and now the
level of deposits has come down to Rs.23.25 crores as on 20th August 1998.
Because of the oppressive operations of the guidelines referred above, the
negative growth in the economy, the failure of certain established NBFCs a
fear physcios has been injected in the minds of depositors and today the
Company`s depositors stand confused and panic driven.
Due to non acceptance of fresh deposits and to meet the unprecedent
withdrawal of deposits forced the company not to initiate actions for
disbursement of fresh Hire Purchase and Lease advances. The profitability
of the company has been severely affected by the following factors.
1. No fresh income from business operations
2. High interest cost not matched by increase in income.
3. Higher provisioning for NPA and doubtful debts and non recognition to
income as per RBI guidelines.
4. Extreme mismatch of deposits to advances tenure wise.
5. Reduction in other income.
The Capital Market has almost become non-existence in India: the company
has surrendered its licence to function as Merchant Banker Category 1. The
full fledged Foreign Exchange Money Changing operations of the company
particularly in Chennai has improved as compared to the previous year. The
Foreign currencies transacted during the year was around Rs.44 Crores.
After due evaluation your company has been appointed as one of their agents
by Western Union Financial Services International with Head Quarters at New
Jersey, USA for money transfer segment (inward remittances). Reserve Bank
of India, Mumbai has accorded permission for the purpose.
DIVIDEND
The company incurred losses due to provision and Non Recognition of income
for Non Performing Assets. Hence dividend could not be recommended for the
year.
FUTURE PROSPECTS
The company is determined to remain in the business of Hire Purchase and
Leasing. The liquidity crunch and recession in the Indian economy should be
taken as a temporary phase. The oppressive guidelines imposed on NBFCs
unilaterally will have to be redefined so as to make them practical and
realistic. The company assured of good management will with the patronage
of its depositors ,of its depositors share holders and bankers and it will
succeed in adjusting its operations suitably and before long your company
will come out to re-establish asset as a viable and vibrant Non Banking
Hire Purchase Finance Company.
PRUDENTIAL NORMS FOR NON-BANKING FINANCIAL COMPANIES
Your Directors are happy to reopen that your Company has complied with the
revised prudential norms prescribed by Reserve Bank of India as per
Notification No.DFC 125/ED(G)-98 dated 12.05.1998 for income recognition
and provision for Non performing Assets. While complying with the relative
stringent norms almost all the NBFCs are showing negative growth and
booking losses.
RBI REGISTRATION
Your company has applied to Reserve Bank of India (RBI) for issue of
certificate of registration in June 1997 to carry on the business as
required under Section 45 -1A (2) of the Reserve Bank of India Act 1934.
The Company`s books has already been scrutinised by the Auditors deputed by
Reserve Bank of India for the purpose. We are awaiting their decision in
the manner of issuing us Registration Cerificate.
DIRECTORS
Shri P.G.Saranyan and Air Marshal R.S.Naidu AVSM VM (Red) retire by
rotation and are eligible for re-appoinment.
LISTING OF SHARES OF THE COMPANY
Your Company`s shares are currently listed at Madras, Coimbatore and Mumbai
Stock Exchanges. However keeping in view of no trading for the past few
years at the Mumbai Stock Exchange, it has been decided by the Board to
delist the shares from the Stock Exchange at Mumbai.
The Shares will however continue to remain listed at Madras Stock Exchange
and Coimbatore Stock Exchange.
INFORMATION AS PER SECTION 217 (1) (E) OF THE COMPANIES ACT, 1956
Your Company has no activities relating to conservation of energy or
technology absorption. The Company does not have any foreign exchange
earnings or outgo.
AUDITORS
The Auditors M/s K.G.Purushothaman & Co. Chartered Accountants, Chennai
retires and are eligible for re-appointment.
AUDITORS' OBSERVATION
As regards the observation by the Auditors in Para 2(b)(i) to (iii) of
their report the notes numbered 2, 3 and 6 relating to this matter are self
explanatory.
With regard to Note No.2 we have to report that the matter relating to
getting certificate of registration for some of the vehicles financed under
hire purchase agreements steps have been taken to obtain the same.
With regard to Note No.3, in Notes of Accounts relating to opening
confirmation of balances from Debtors and Creditors the same are being
pursued and except a few cases confirmation have been obtained in all.
Needless to point out the hirers have executed very many documents in
favour of the Company with continuing clauses.
With regard to Note No.6 there has been a continuous pressure for repayment
of deposit on maturity and several cases on account of pre-closure. Under
these circumstances the company could not enhance maintenance of statutory
liquidity reserve from 10% to 15% at short notice. The company shall be
taking effective steps to comply with the statutory requirement as soon as
reasonable improvement in liquidity position is attained.
PARTICULARS OF EMPLOYEES
None of the personnel in the Company was in receipt of remuneration in
excess of the limits prescribed in Section 217(2A) of the Companies Act
1956 during the year under review.
PROJECTION VS PERFORMANCE
The decline in performance is mainly due to non availability of funds for
business operation owing to monetary policy affecting NBFCs in particular
and due to over all prevailing general recessionary trend throughout the
industry and provisioning made as per RBl s directions for Non Performing
Assets.
ACKNOWLEDGEMENT
Your Directors wish to thank the Banks Customers and Depositors and place
on record their appreciation of the good work done by all the employees of
the Company.
Registered Office: For and on behalf of the Board of Directors
624,Anna Salai, P.G. SARANYAN
Chennai- 600 006 Chairman
Date : 20th August, 1998.